Nigeria’s economy has surpassed South Africa’s economy as the largest on the continent after the country overhauled its Gross Domestic Product data for the first time in twenty four years.
The country’s National Bureau of Statistics recalculated the value of Nigeria’s GDP based on production patterns in 2010 which resulted in an increase in the number of industries it measures to 46 from 33. It also gave greater weighting to sectors such as telecommunications and financial services.
Based on the rebasing exercise, the size of the Nigerian economy is estimated at $509.9 billion for 2013, Yemi Kale, head of the National Bureau of Statistics, said in a report released in the capital, Abuja. Compared to South Africa’s $370.3bn GDP for 2013, this makes Nigeria Africa’s largest economy.
“Rebasing does not change what was already there, it’s just about measuring better and more accurately,” Kale said.“It does not mean that within 24 hours something miraculous has happened.”
Regarding the rebasing exercise, African Finance Corporation’s CEO, Mr. Andrew Alli released the following statement to CP-Africa thus:
“As widely predicted, the rebasing of Nigeria’s GDP has today revealed that the country has overtaken South Africa and has become the largest economy on the continent. I hope the announcement will influence international investors’ perceptions of Nigeria and Africa, helping them to reconsider the scale of the opportunity and potential returns. However, it is only through continued investment in basic infrastructure projects, such as road, rail and power generation, that all African countries will really be able to transform prevailing investor sentiment, demonstrate there is more to Africa than just natural resources, and harness opportunities presented by their young and growing populations. Failure to do so could be catastrophic.”
Financial analyst Bismarck Rewane called the revisions “a vanity.” “The Nigerian population is not better off tomorrow because of that announcement. It doesn’t put more money in the bank, more food in their stomach. It changes nothing,” he said.
What is rebasing?
According to the United Nations:
rebasing is the process of replacing present price structure [base year] to compile volume measures of GDP with a new or more recent base year.
Rebasing is basically a need to update a country’s national statistics.
According to the BBC:
Economies are dynamic things; they grow, they shrink, they add new sectors and technologies and people’s behaviours change. One of the uses to which GDP data is put is to track how the economy grows over time. So, as GDP numbers are only relevant when compared to other GDP numbers, the year that serves as the base for their comparison needs to change as well to reflect the changes in the economy. There are basically two ways to measure gross domestic product (GDP), the sum of a country’s goods and services.
Firstly, nominal GDP. This is the sum value of all produced goods and services at current prices. This measure does have its uses. But real GDP is more widely used and is slightly different. It’s the sum value of all produced goods and services at constant prices and is useful for showing how the economy changes in size and – with some further manipulation – how average living standards change over time. The constant prices are the ones from the base year – whichever that is.
For instance, Nigeria’s now massive phone industry did not exist 25 years ago.
To the average person on the street, the GDP rebasing will have no effect on his or her life. However, certain economic ratios such as Nigeria’s debt to GDP ratio will fall.